Entries in law
(3)

No, the hurricane didn’t blow this blog away, but I’ve been hosed nonetheless. Still, I want to get back to writing, so will maybe stick to something a bit shorter-form.

Lately, I’ve been fascinated with the rise in value of Bitcoin (BTC), a distributed, anonymous, cryptographic token transaction system intended for use as a currency. My original thought on the technology was “nifty idea”, but never would have thought it would have much in the way of real value (not that virtual goods can’t have real value, but BTC isn’t, by itself, much of a game). Icertainly didn’t see it rising again after the initial bubble and crash, but if you look at the charts, you’ll see that the value is now above the June 2011 bubble and crash. That crash was precipitated by a security breach and subsequent flash-crash at Mt. Gox (the largest Bitcoin exchange). Subsequent high-profile security breaches in the immediate months following surely didn’t help, but it’s worth noting that such incidents didn’t cease in November 2011, BTC was able to regain its value despite the occasional digital bank-robbery.

So given my interest, and my surprise, I was fascinated by this essay by Gwern on anonymous black-market website Silk Road (the site itself can be found here, I link to this for educational/informative purposes only and not to encourage you to do anything illegal). The essay is a very detailed, down-to-brass-tacks look at how Silk Road works and what its weaknesses might be.

Silk Road is designed to conduct business with only the minimum amount of information possible. A normal e-commerce website ends up with the following information:

Payment information for the buyer

Payment information for the seller

Reviews left by the buyer for the seller

Information sent by buyer to seller (including at least a shipping address)

Encrypted gibberish sent by the buyer to the seller (including at least the buyer’s address), plus a public key for the seller (which everyone can see)

Encrypted gibberish sent by the seller to the buyer, if any (the buyer has no need to post a public key, they can send it to the seller in their message if they need a reply)

The seller’s pseudonym

The last hop of the connection path users take to access the site

Silk Road can also strengthen their resilience against outside attack by only keeping recent data for items 1, 2, 4, and 5, and no data for item 7 (there is, however, no way for users to verify that they are in fact doing so).

Silk Road also employs several technologies / methods to mitigate the effects of anonymity:

Reputation economy (presumably the reason they allow for pronounceable seller pseudonyms (6), while keeping information to an absolute minimum in so many other ways), plus methods for quantitative and qualitative analysis of buyer feedback data

Seller account auctions (SR admins say the primary reason for this is to make the sort of attacks (note that includes scams or stings) that can be done with new accounts at least very costly to do repeatedly; of course, this also makes money for whoever’s running Silk Road)

So Silk Road not just a straightforward application of Bitcoin. Bitcoin is just a main ingredient in the whole cypherpunk stew!

Also, this is not to imply that the system doesn’t have weaknesses. It still falls short of the goal of full cryptographic anonymity. For one thing, the seller ends up with a physical post address for the buyer. Postal addresses are a lot harder to generate and anonymize than Bitcoin addresses or private keys, and the movement of physical packages is a lot easier to inspect and trace than TOR connections.

Gwern suggests that Silk Road could be brought down through DDoS or acquiring a large number of accounts for some coordinated scam. Acquiring new accounts to do individual stings is too high cost for too little gain, especially since the value of “flipping” a Silk Road buyer is very low (there’s little they can do to get information on Silk Road sellers). Perhaps law enforcement will decide to do some stings anyways to make an example of a few cypherpunk drug-purchasers; the ineffectiveness of that tactic as a deterrent doesn’t stop people from trying.

Gwern doesn’t mention the demise of Bitcoin scenario described by Moldbug in this post, where the value of Bitcoins is brought down by a broad-scale legal attack on the Bitcoin exchanges, indicting them all for money laundering (Bitcoin tumblers might be more deserving of this attack, but targeting the exchanges will be easier and more effective). That wouldn’t prevent people from trading Bitcoins for goods. But Silk Road’s selection still isn’t as good as Amazon’s, and Bitcoins are still not sufficiently liquid when it comes to things like rent and groceries, so the value of a Bitcoin in rent and groceries still depends on the exchange rate with less science-fictiony currencies. Not that it would be impossible to find someone on Silk Road to ship you food, but you really don’t want to buy your necessities at black market prices if you can help it. Being able to spend money earned at a black market premium on things not sold at a black market premium is a big advantage of illicit trafficking.

(This post is way delayed and fairly disorganized, but I’m putting aside further editing in the interest of getting it out the digital door.)

Occupy is interesting, but it’s also interesting to consider the variety of tactics police have used in opposing the movement. On the one hand, there’s the UC Davis incident, where the message of “if you are in the way, we will hose you down with military grade pepper spray at point-blank range” was communicated by actually doing just that. That might be legal, even in the liberal 9th circuit, but doesn’t exactly defuse the situation, and it’s unclear whether it will prevent the protesters from achieving (some of) their goals.

On the other hand, there’s the aikido tactics of the St. Louis Police. As related in this post by Brad Hicks, after a series of fake-out maneuvers, the police acted with a combination of power and restraint:

[…] [The police] didn’t show up in riot gear and helmets, they showed up in shirt sleeves with their faces showing. They not only didn’t show up with SWAT gear, they showed up with no unusual weapons at all, and what weapons they had all securely holstered. They politely woke everybody up. They politely helped everybody who was willing to remove their property from the park to do so. They then asked, out of the 75 to 100 people down there, how many people were volunteering for being-arrested duty? Given 33 hours to think about it, and 10 hours to sweat it over, only 27 volunteered. As the police already knew, those people’s legal advisers had advised them not to even passively resist, so those 27 people lined up to be peacefully arrested, and were escorted away by a handful of cops. The rest were advised to please continue to protest, over there on the sidewalk … and what happened next was the most absolutely brilliant piece of crowd control policing I have heard of in my entire lifetime.

All of the cops who weren’t busy transporting and processing the voluntary arrestees lined up, blocking the stairs down into the plaza. They stood shoulder to shoulder. They kept calm and silent. They positioned the weapons on their belts out of sight. They crossed their hands low in front of them, in exactly the least provocative posture known to man. And they peacefully, silently, respectfully occupied the plaza, using exactly the same non-violent resistance techniques that the protesters themselves had been trained in. […]

By dawn, the protesters were licked.

(Again, read the whole thing.)

The clearing of Occupy Boston used some of the St. Louis tactics, so maybe those are catching on. More brutal tactics may or may not be self-defeating, but I suppose that depends on exactly how farpolice are willing to go, as Brad points out, addressed towards police:

In case you haven’t noticed, you are not the only police officers who have been asked to use as much force as necessary, in order to crack down on trivial ordinance violations, as an excuse to shut those citizens up. Your fellow police have been asked to shut down those protests in every country in Latin America, in every country in the Middle East, in every country in North Africa, and in almost every country in Europe. In country after country, one of three things has happened: the cops obeyed orders and the kleptocrats are getting away with imposing austerity, or else the cops obeyed orders but foreign governments stepped in, citing actual or impending police atrocities, and overthrew the kleptocrats, or else they did something that you chose not to do, this last week or two.

In a few countries, the cops saw that they didn’t have the choice of defending the perfectly law abiding, saw that they were being asked to defend criminals, concluded that they could not morally justify obeying the order to shut down the protests, and went home. Few if any of the protesters even asked the police to switch sides and join the protests against kleptocracy. Most of us know that that’s an unreasonable request, we know that most of you feel that you owe it to the uniform you wear, and to the oath you took, and to your fellow officers, not to join the protesters. But in the countries where the police, asked to use force to shut down peaceful protests against kleptocracy, took off their uniforms and went home until it was all over? Not just in the Arab (Spring) world, but in places like Iceland? Freedom is on the march. Nor have those countries slid into poverty because they refused to cover the debts that the thieves owed to the dishonest bankers; those countries are recovering from the global recession faster than we are.

Public austerity is a great cover for the expropriation of wealth by the rich (by using their accumulated capital to go on acquisition sprees for assets being sold off for cents on the dollar by the near-bankrupt state). But public austerity is a huge brake on economic growth because it undermines demand by impoverishing consumers. Consequently, we’re in for another long depression. […]

Starving poor people with guns and nothing to lose scare the rich; their presence in large numbers is one major component of a pre-revolutionary situation. […] Worse, the poor have smartphones. […]

The oligarchs are therefore pre-empting the pre-revolutionary situation by militarizing the police (as guard labour).

There’s a lot of talk about the US debt ceiling and whether that will be raised or not by the August 2 deadline. The odd thing about this is that it’s always framed in terms of an impending default, when it’s not clear that will happen at all. Especially when that’s expressly prohibited by the US Constitution (Amendment 14, Section 4):

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Clearly, the amendment addresses debt in the context of the Civil War in particular, but it’s not unreasonable to read that as a blanket prohibition on a default on treasury bonds. So on August 2, absent legislation, we’ll be in the following state:

Congress has said “no more borrowing”.

Congress has determined how money can be printed, and the answer is “not without more borrowing” (money is printed by the Fed and exchanged for new Treasury Bonds).

Congress has specified the amount of taxes to be taken in.

Congress has specified how much is to be spent and on what. (But it’s a higher amount than the revenues provided for in 2!)

Treasury Bonds specify when they need to be repaid and for how much, and the Constitution says Congress can’t just decide to not pay those. (There are also a few other obligations the Constitution says Congress can’t decide not to pay, including judicial salaries.)

That’s an odd state, as of yet untested under US law. Clearly, something’s got to give. The executive department must faithfully meet conditions 1-5, which is impossible. The Constitution gives only Congress the authority to alter 1-4, and no one the authority to alter 5.

Since the debt ceiling law and the most recent budget are in some sense contradictory, and Congress is the one with the power to alter those conditions, I think the relevant question is how to interpret the actions of Congress regarding those laws. I can think of a two reasonable possibilities:

One: The budget implicitly raises the debt ceiling to cover the difference between revenues and expenses, since otherwise that law would be requiring the impossible. (Bill Clinton seems to take almost this view, but it’s a way better argument to suggest that Congress implicitly loosened 4 than to say the Constitution gives the president the authority to violate 1 in order to fulfill 5. Both are required by the Constitution, it would be quite an ass-pull to say that Am. 14 Sec. 4 gives additional emergency borrowing powers to the Executive Branch.)

Two: The debt ceiling law, unless explicitly repealed, implicitly limits spending after the debt ceiling is reached to revenues taken in. The budget didn’t amend that restriction, so the restriction still applies. Unfortunately, the debt ceiling law doesn’t specify what spending to cut or how that should be decided. But a reasonable assumption might be that the Executive Branch (the Secretary of the Treasury?) would have the authority.

That puts the power in the right constitutional place: When Congress passed the last budget, they either intended increased borrowing or decreased spending, they can’t have both. That’s what should happen. Of course, it’s not ideal for courts to try to interpret laws that are either overly vague or logically impossible, but it’s not the courts’ fault that Congress failed to do at least one of those in this case.

Some have suggested that the debt ceiling law is unconstitutional because they view all spending as sacrosanct under Am. 14 Sec. 4. There’s a good take-down of that argument by Professor Lawrence Tribe, here. His counter-argument is sort of like my second case above, except he doesn’t claim that “bend 4 to satisfy 1-3” is implicit in the budget, he just cites legal precedent. (I like my argument a bit better, but Tribe’s argument certainly beats Clinton’s, and I’m willing to defer to his expertise.) I also agree with the caveat on his conclusion:

I do not mean to suggest that, if it becomes necessary for the President to prioritize expenditures, the President is free to use whatever priorities he likes. First, the Constitution itself requires giving some expenditures (such as the payment of judicial salaries, Art. III, § 1, or payments on the public debt, Amdt. XIV, § 4) priority over others. Second, even if circumstances make it impossible for the President to obey the anti-line item veto rule announced in Clinton v. New York, he must do his best to honor the principles animating that rule: namely, using the line item veto to give the President unbounded power over spending would allow the Chief Executive to reward political allies and punish political adversaries. The President may not, for example, prioritize spending in blue states over spending in red states. Within those constitutional boundaries, however, it is up to the President to determine how spending must be prioritized when it becomes impossible to comply with all of the President’s legal obligations simultaneously.

I don’t know if that’s a reasonable prediction of what would actually happen if the debt ceiling failed to be raised. Obama would have the first move, so if he did something other than prioritize spending, the courts would have to react to that instead.

And it’s not clear that such a “default” (not actually a default!) will happen. There are still possible ways to avoid that, including congress actually raising the debt ceiling, or harebrained schemes in which Congress restores the “out of power party futilely opposes the debt limit raise” status quo by handing over the raise-the-debt-limit power to the Executive, reserving for Congress enough power to oppose Obama’s decision but not enough to actually succeed.

(Also, if all this media default hullabaloo has you thinking about fleeing to gold or some such, you should find this Moldbug piece interesting.)